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Expenditure Query

arnav (student) (78 Points)

29 March 2011

The client having medical profession taxing his income under the head PGBP.

He wants to enquire about a deductability of full amount of interest payment through his bank account to vehicle's loan account which is borrowed by his brother since the vehicle has legal owner none of the other than his brother. (He is co-borrower in respect of this loan.)

He uses vehicle into the profession for travelling over the places which he requires to visit.

Is it only interest which is deductible under section 36(1)(iii) ?

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U S Sharma (glidor@gmail.com) (21056 Points)
Replied 30 March 2011

he have option to adjust the things

he can show the whole proceeds paid to bank , as rent of car paid to his brother, this is allowed expenditure for his business and profession

his brother will set off interest and depriciation from the amount andf show the balance ( capital payment portion) in his profit after depreciation.

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CA Saiyum khan (Practicing CA) (685 Points)
Replied 30 March 2011

Originally posted by : arnav
	The client having medical profession taxing his income under the head PGBP. He wants to enquire about a deductability of full amount of interest payment through his bank account to vehicle's loan account which is borrowed by his brother since the vehicle has legal owner none of the other than his brother. (He is co-borrower in respect of this loan.) He uses vehicle into the profession for travelling over the places which he requires to visit. Is it only interest which is deductible under section 36(1)(iii) ?

To the ITO it will not sound good logic to use the Asset in own business and profession, borrow the capital and pay interest for the vehicle which is owned by some body else. It is advisable to get the asset transferred in the name of the assessee who is using asset for his profession and paying interest on loan borrowed fund for purchasing of car. By doing so the benefit of depreciation would aslo be available to the assessee.

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arnav (student) (78 Points)
Replied 30 March 2011

Originally posted by : saiyumkhan
	Originally posted by : arnav The client having medical profession taxing his income under the head PGBP. He wants to enquire about a deductability of full amount of interest payment through his bank account to vehicle's loan account which is borrowed by his brother since the vehicle has legal owner none of the other than his brother. (He is co-borrower in respect of this loan.) He uses vehicle into the profession for travelling over the places which he requires to visit. Is it only interest which is deductible under section 36(1)(iii) ? To the ITO it will not sound good logic to use the Asset in own business and profession, borrow the capital and pay interest for the vehicle which is owned by some body else. It is advisable to get the asset transferred in the name of the assessee who is using asset for his profession and paying interest on loan borrowed fund for purchasing of car. By doing so the benefit of depreciation would aslo be available to the assessee.

Thanks for advise..

then Can he suppose to undisclose this expenditure at all?

Can he make no reference of his vehicle in his IT Return?

Is that ok as per IT Act?

arnav (student) (78 Points)
Replied 30 March 2011

Originally posted by : U S Sharma
	he have option to adjust the things he can show the whole proceeds paid to bank , as rent of car paid to his brother, this is allowed expenditure for his business and profession his brother will set off interest and depriciation from the amount andf show the balance ( capital payment portion) in his profit after depreciation.

Is this adjustment has any legal stand?

Any Case Law for reference...

Thanks for suggestion..

U S Sharma (glidor@gmail.com) (21056 Points)
Replied 31 March 2011

LOAN is taken by his brother, not by himself , he is paying only the EMI, or interest whatsoever

option in his hands

1) to show the amount as gift to his brother and forget everything

2) to show the amount as rent paid to his brother for car used by him and avail deduction in pgbp

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CA Saiyum khan (Practicing CA) (685 Points)
Replied 31 March 2011

Originally posted by : arnav
	Originally posted by : saiyumkhan Originally posted by : arnav The client having medical profession taxing his income under the head PGBP. He wants to enquire about a deductability of full amount of interest payment through his bank account to vehicle's loan account which is borrowed by his brother since the vehicle has legal owner none of the other than his brother. (He is co-borrower in respect of this loan.) He uses vehicle into the profession for travelling over the places which he requires to visit. Is it only interest which is deductible under section 36(1)(iii) ? To the ITO it will not sound good logic to use the Asset in own business and profession, borrow the capital and pay interest for the vehicle which is owned by some body else. It is advisable to get the asset transferred in the name of the assessee who is using asset for his profession and paying interest on loan borrowed fund for purchasing of car. By doing so the benefit of depreciation would aslo be available to the assessee. Thanks for advise.. then Can he suppose to undisclose this expenditure at all? Can he make no reference of his vehicle in his IT Return? Is that ok as per IT Act?

It is also difficult to undisclose the entire expense itself since the EMI is paid from his account.. However the emi amount can be taken as gift in the hand of his brother.

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